## IMF Executive Board Concluded 2023 Article IV Consultation with The Kingdom of Bahrain

_IMF News, July 11, 2023_

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## Bibliographic details
- Published: July 11, 2023

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### Recent economic developments
- Real GDP grew by 4.9 percent in 2022.
- Non-hydrocarbon GDP grew by 6.2 percent in 2022; hydrocarbon GDP contracted by 1.4 percent in 2022.
- Non-hydrocarbon growth was driven by public, financial, and hospitality services and manufacturing.
- CPI inflation accelerated from -0.6 percent (average in 2021) to 3.6 percent in 2022.
- State budget deficit narrowed to 1.2 percent of GDP in 2022, from 6.4 percent in 2021.
- Overall fiscal deficit declined from 11 percent of GDP in 2021 to 6.1 percent of GDP in 2022.
- Government debt declined to 117.6 percent of GDP in 2022 from 127.1 percent of GDP in 2021.
- Current account surplus estimated at 15.4 percent of GDP in 2022, up from a 6.6 percent of GDP surplus in 2021.
- Banking system described as resilient with ample buffers and has withstood the phasing out of COVID measures and tightening financial conditions.

### Outlook and risks
- Growth projected to moderate to 2.7 percent in 2023.
- Non-oil GDP projected to grow by 3.3 percent in 2023.
- Growth projected to stabilize at around 2.7 percent over the medium term.
- Key uncertainties identified: oil price volatility, international financial turmoil and ongoing tightening, and a slowdown in global growth.

### Fiscal and external policy assessment
- Authorities committed to fiscal and structural reforms under the Fiscal Balance Program and Economic Recovery Plan focused on reducing the fiscal deficit and public debt and advancing diversification.
- Directors emphasized implementing a medium-term fiscal adjustment plan to ensure fiscal and external sustainability and reduce reliance on oil revenues.
- Importance of embedding fiscal reforms in a credible medium-term fiscal framework was underscored.
- Improving debt and fiscal transparency, including by gradually reducing extrabudgetary spending, was recommended.
- Directors emphasized freezing the government overdraft account at the central bank and developing a plan for its repayment to bolster reserves and support the external position and the peg.

### Monetary and financial sector policy assessment
- Directors agreed the exchange rate peg continues to serve Bahrain well as a monetary anchor; monetary policy should continue to follow the Fed.
- Fiscal consolidation and structural reforms seen as supportive of the external position.
- Successful withdrawal of COVID support measures was welcomed.
- Continued close monitoring of financial stability risks and strengthening of macroprudential frameworks recommended given headwinds from tightening financial conditions.
- Recommendations included further strengthening of regulatory, supervisory, bank resolution, and macroprudential frameworks.
- Encouraged careful assessment of benefits and risks in introducing a central bank digital currency, with Fund CD support.
- Bahrain’s leading role in the fintech agenda was welcomed.

### Structural reforms and longer-term priorities
- Continue improving labor market flexibility and empowering women to increase labor force participation.
- Leverage opportunities from regional integration.
- Press ahead with climate mitigation through a gradual phasing out of energy subsidies and further investments in renewable energy to facilitate the climate transition without creating additional fiscal needs or weighing on growth.

### Key statistics (selected, as reported)
- Real GDP growth: 2.2 (2019); -4.6 (2020); 2.7 (2021); 4.9 (2022); 3.6 (2023 projection).
- Hydrocarbon: -0.1 (2019); -0.3 (2020); -1.4 (2021); 0.1 (2023 projection).
- Non-hydrocarbon: -5.6 (2019); 3.3 (2020); 6.2 (2021); 4.3 (2023 projection).
- Consumer Price Index (period average): 1.0 (2019); -2.3 (2020); -0.6 (2021).
- Nominal GDP (BD millions): 14,534 (2019); 13,018 (2020); 14,778 (2021); 16,691 (2022); 16,980 (2023 projection); 17,778 (2024 projection).
- Revenue (percent of GDP): 23.7 (2019); 17.9 (2020); 20.8 (2021); 23.1 (2022); 23.2 (2023 projection); 23.0 (2024 projection).
- o/w Hydrocarbon revenue (percent of GDP): 14.5 (2019); 9.5 (2020); 12.2 (2021); 14.6 (2022); 14.0 (2023 projection); 14.1 (2024 projection).
- Expense (percent of GDP): 28.6 (2019); 30.9 (2020); 27.5 (2021); 26.0 (2022); 25.1 (2023 projection); 24.4 (2024 projection).
- Expenditure1 (percent of GDP): 32.7 (2019); 35.8 (2020); 31.8 (2021); 29.2 (2022); 28.5 (2023 projection); 27.1 (2024 projection).
- Net lending (+) / Net borrowing (-) (percent of GDP): -9.0 (2019); -17.9 (2020); -11.0 (2021); -6.1 (2022); -5.4 (2023 projection); -4.1 (2024 projection).
- Government gross debt (percent of GDP): 101.6 (2019); 130.1 (2020); 127.1 (2021); 117.6 (2022); 121.1 (2023 projection); 119.9 (2024 projection).
- Goods Exports (US$ billion): 18.1 (2019); 22.4 (2020); 30.2 (2021); 25.9 (2022); 27.3 (2023 projection).
- of which: Hydrocarbon (US$ billion): 9.9 (2019); 5.9 (2020); 15.1 (2021); 11.7 (2022); 12.5 (2023 projection).
- Goods Imports (US$ billion): 17.3 (2019); 14.2 (2020); 17.5 (2021); 21.9 (2022); 20.6 (2023 projection); 22.1 (2024 projection).
- Current account balance (US$ billion): -0.8 (2019); -3.2 (2020); 2.6 (2021); 6.8 (2022); 3.4 (2023 projection); 3.1 (2024 projection).
- Current account (percent of GDP): -2.1 (2019); -9.4 (2020); 6.6 (2021); 15.4 (2022); 7.6 (2023 projection).
- Official reserve assets2 (US$ billion): 3.7 (2019); 4.7 (2020); 4.5 (2021); 8.0 (2022).
- In months of prospective non-oil imports: 1.2 (2019); 2.3 (2020); 3.0 (2021).
- Broad money (percent change): 11.1 (2019); 6.5 (2020); 3.9 (2021); 6.1 (2022); 4.1 (2023 projection).

*Press Release No. 23/260 — July 11, 2023*

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## References

- [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)
- [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)
- [Kingdom of Bahrain and the IMF](http://www.imf.org/external/country/BHR/index.htm)
- [Kuwait and the IMF](http://www.imf.org/external/country/KWT/index.htm)
- [Oman and the IMF](http://www.imf.org/external/country/OMN/index.htm)
- [Qatar and the IMF](http://www.imf.org/external/country/QAT/index.htm)
- [Saudi Arabia and the IMF](http://www.imf.org/external/country/SAU/index.htm)
- [United Arab Emirates and the IMF](http://www.imf.org/external/country/ARE/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
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- [PRESS CENTER](http://presscenter.imf.org/)
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_Source: https://www.imf.org/en/news/articles/2023/07/11/pr23260-bahrain-imf-exec-board-concluded-2023-article-iv-consultation_